Oil Shale

It isn’t oil and it isn’t shale, but Colorado has the world’s largest resources of oil shale, by far. Oil shale is actually the rockmarlstone which containskerogen, a precursor to oil. The kerogen must be heated to more than 750 degrees to convert it into oil because it was never buried deeply enough for nature to convert the kerogen to oil.

People have been trying to economically produce oil from this rock for more than a century. Indeed, the Colorado Geological Survey issued a report in 1921 entitled,Oil Shales of Colorado. Thus far, technological and economic conditions have not combined to support a sustained oil shale industry in Colorado.

Oil shale has been facetiously branded “the fuel of the future”, because up until the 21st century, folks would claim, “when the price of oil reaches $x per barrel (usually about 50% higher than whatever the price currently was), oil shale will be economic. However, a sea change occurred when Shell announced that they felt their process for extracting oil from the strata would be economic at alowerprice than the current price.

Currently, there are five RD&D (Research, Demonstration and Development) projects in the Piceance Basin of Colorado that have been awarded a 160-acre tract of federal land upon which to demonstrate to the Bureau of Land Management (BLM) the commerciality of their particular process. If they can prove that their process is capable of commercial production, then they have the right to purchase, at fair market value, an additional 5,000 acres that is pre-selected. In 2010, three additional RD&D projects were approved, but they do not have the right to acquire the 5,000 additional acres.

Oil shaleshould not be confused withshale oil. In shale oil, the strata were buried deeply enough that the temperature was sufficiently high to naturally convert the kerogen into oil. Currently, a major exploration effort is being carried out in Colorado to produce oil from the Niobrara shales, primarily in eastern Colorado. In shale oil plays such as the Bakken in North Dakota and Montana, the objective is to find brittle layers in the shale, drill horizontal holes along those brittle layers, artificially fracture the rock, and produce the resulting oil.